Iran-Israel War, Crude Oil, FII Flows: 9 Factors Steering Markets This Week
Benchmark indices faced a significant downturn on Friday, largely due to widespread selling across key sectors, particularly in auto, financials, and FMCG stocks. As domestic markets prepare to reopen on Monday, a packed calendar of global and local events is set to influence investor sentiment.
1) Iran-Israel War
As global markets resume on Monday, the Iran-Israel conflict is expected to escalate, creating considerable uncertainty within financial markets. Investor sentiment is likely to remain fragile as long as the hostilities persist, with speculation suggesting the conflict may endure for an extended period.
Recent Developments
– Israeli Strikes: Israel initiated pre-emptive strikes on Iran following failed negotiations on a nuclear deal.
– Iran’s Response: Iran retaliated with missile attacks targeting Israel and U.S. bases in the region.
2) U.S. Markets
Domestic equities will likely reflect the performance of U.S. markets. Major U.S. indices ended lower on Friday, driven by risk-averse sentiment:
– Dow Jones: Decreased by 521.28 points (1%) to close at 48,977.90.
– Nasdaq Composite: Dropped by 210 points (1%) to settle at 22,668.20.
– S&P 500: Finished slightly lower with a loss of 0.43%.
3) Crude Oil Prices
Crude oil prices will be closely monitored this week, with both Brent and U.S. WTI benchmarks seeing increases of over 3% in the previous session:
– WTI Crude: Settled at $67.29 per barrel, up $2.08 (3.19%).
– Brent Crude: Rose to $72.87 per barrel, climbing by $2.37 (3.4%).
The trajectory of inflation is closely linked to crude oil prices. Given that India imports approximately 80% of its crude oil, any significant rise could intensify domestic inflationary pressures and affect market sentiment.
4) FII and DII Actions
Recent data indicates that Foreign Institutional Investors (FII) sold Indian equities worth ₹7,536.36 crore, while Domestic Institutional Investors (DII) were net buyers at ₹2,292.81 crore. The recent sharp sell-off from FIIs has cast doubt on the sustainability of their prior trend reversal seen earlier in the month.
5) AI Sector Challenges
The IT sector is under persistent pressure, exhibiting critical weakness on both fundamental and technical fronts:
– Indicators: Momentum indicators show a bearish trend, with the RSI deeply oversold around 22.
– Outlook: Unless the index reclaims the 31,000-31,300 ranges, the forecast remains bleak.
6) Sector-Specific Impacts
The ongoing Iran-Israel conflict could significantly affect multiple sectors:
– Oil Marketing Companies (OMC) may face profitability issues if oil prices surge.
– Explorers like ONGC might benefit from rising crude prices.
– Airlines and tourism stocks are also expected to respond to market changes on Monday.
7) Technical Triggers
Technical experts indicate that the Nifty index has fallen below its crucial 200-DMA, now acting as immediate resistance:
– Current Trend: The index exhibits a pattern of lower tops and bottoms, suggesting continued weakness.
– Support Levels: Key psychological support is found at the 25,000 mark.
8) Rupee vs. Dollar
The performance of the rupee against the U.S. dollar will be a focal point this week. The rupee declined by 17 paise to close at 91.08 against the dollar, influenced by foreign fund outflows and rising global crude oil prices.
9) IPO Watch
Action in the primary market is expected to be limited this week, with only one new IPO:
– Sedemac Mechatronics: Aimed at raising ₹1,087 crore, opening from March 4 to March 6, priced between ₹1,287-1,352 per share.
In conclusion, the interplay of the Iran-Israel war, crude oil prices, and financial institutional activities will significantly steer market trends this week. Investors should remain vigilant to adapt to these changing dynamics in the financial landscape.